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Restaurant Brands International Inc. Reports Third Quarter 2021 Results

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  • QSR
  • RSTRF

Global system-wide sales grew 11% year-over-year and accelerated sequentially to +5% compared to 2019
Burger King international system-wide sales grew 25% year-over-year and +10% compared to 2019
Year-to-date unit growth and pipeline keep RBI on track to return to pre-pandemic levels in 2021 and accelerate in 2022
Returned over $425 million of capital to shareholders through dividends and share buybacks
Announced commitment to reduce greenhouse gas emissions 50% by 2030 and reach net zero emissions by 2050 or sooner

TORONTO, Oct. 25, 2021 /CNW/ - Restaurant Brands International Inc. (TSX: QSR) (NYSE: QSR) (TSX: QSP) today reported financial results for the third quarter ended September 30, 2021.

restaurant brands international (CNW Group/Restaurant Brands International Inc.)
restaurant brands international (CNW Group/Restaurant Brands International Inc.)

José Cil, Chief Executive Officer of Restaurant Brands International Inc. ("RBI") commented, "Our results this quarter reflect the value of having a diversified business model across three brands and in over 100 countries. Overall, we saw a continued acceleration in system-wide-sales growth relative to 2019, reflecting improvements in the Tim Hortons Canada business as well as strength across each of our brand's international businesses. Our strong restaurant growth this year and exciting development pipeline keep us on track to return to pre-pandemic unit growth levels this year and well positioned to accelerate in 2022 as we continue on our path to 40,000 restaurants around the world. This quarter, we also took important steps to focus our attention on the most significant opportunities at Burger King U.S. to drive long-term, sustainable growth in the business."

Cil continued, "Our highly efficient business model once again generated strong free cash flow, enabling us to continue investing in our business while also enhancing shareholder returns through both our dividend and recently expanded $1 billion share repurchase program. During the quarter, we returned over $425 million of capital to shareholders, including repurchasing just over $180 million of common stock, reflecting the confidence we have in our long-term outlook and the intrinsic value of our scalable business."

Cil concluded, "Our big goal is to drive business growth without carbon growth. I'm so proud of the team's work to set ambitious goals to reduce our carbon footprint in the world. We have exciting and important sustainability projects underway across the company, in green building standards, packaging, recycling, growing our charitable Foundations and doing the hard work with our suppliers and franchisees to improve the environmental footprint we have in the world."


Consolidated Operational Highlights


Three Months Ended September 30,



2021



2020



(Unaudited)

System-wide Sales Growth






TH


11.1 %




(13.7) %


BK


12.3 %




(7.9) %


PLK


4.4 %




21.5 %


Consolidated


10.8 %




(5.4) %


System-wide Sales (in US$ millions)






TH

$

1,774



$

1,520


BK

$

6,212



$

5,484


PLK

$

1,392



$

1,331


Consolidated

$

9,378



$

8,335


Net Restaurant Growth






TH


4.1 %




1.0 %


BK


1.3 %




2.4 %


PLK


5.5 %




7.1 %


Consolidated


2.4 %




2.7 %


System Restaurant Count at Period End






TH


5,137




4,934


BK


18,923




18,675


PLK


3,607




3,418


Consolidated


27,667




27,027


Comparable Sales






TH


8.9 %




(12.5) %


BK


7.9 %




(7.0) %


PLK


(2.4) %




17.4 %


Note: System-wide sales growth and comparable sales are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants. System-wide sales are driven by sales at franchise restaurants, as approximately 100% of current restaurants are franchised. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales. Additionally, if a restaurant is closed for a significant portion of a month, the restaurant is excluded from the monthly comparable sales calculation.

Consolidated Financial Highlights


Three Months Ended September 30,

(in US$ millions, except per share data)

2021


2020


(Unaudited)

Total Revenues

$

1,495



$

1,337


Net Income Attributable to Common Shareholders and Noncontrolling Interests

$

328



$

223


Diluted Earnings per Share

$

0.70



$

0.47






TH Adjusted EBITDA(1)

$

278



$

258


BK Adjusted EBITDA(1)

$

272



$

245


PLK Adjusted EBITDA(1)

$

57



$

58


Adjusted EBITDA(2)

$

607



$

561






Adjusted Net Income(2)

$

353



$

320


Adjusted Diluted Earnings per Share(2)

$

0.76



$

0.68



Nine Months Ended September 30,


2021


2020


(Unaudited)

Net cash provided by operating activities

$

1,255



$

608


Net cash (used for) provided by investing activities

$

(69)



$

(33)


Net cash (used for) provided by financing activities

$

(970)



$

(182)






LTM Free Cash Flow(2)

$

1,452



$

1,072


Net Debt

$

11,185



$

10,931


Net Leverage(2)

5.2x



5.5x


(1)

TH Adjusted EBITDA, BK Adjusted EBITDA and PLK Adjusted EBITDA are our measures of segment profitability.

(2)

Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share, LTM Free Cash Flow, and Net Leverage are non-GAAP financial measures. Please refer to "Non-GAAP Financial Measures" for further detail.

The year-over-year increase in Total Revenues on an as reported and on an organic basis was primarily driven by an increase in system-wide sales in all of our brands. System-wide sales were more severely impacted by COVID-19 (defined below) during the three months ended September 30, 2020 than in the same period in 2021. Favorable FX movements also contributed to the year-over-year increase in Total Revenues on an as reported basis.

The increase in Net Income Attributable to Common Shareholders and Noncontrolling Interests for the third quarter was primarily driven by increases in segment income in our BK and TH segments and a favorable change in the results from other operating expenses (income), net.

The year-over-year increase in Adjusted EBITDA on an as reported and on an organic basis was primarily driven by increases in Tim Hortons and Burger King Adjusted EBITDA.

The year-over-year increase in Adjusted Net Income was primarily driven by the increase in Adjusted EBITDA in our TH and BK brands, partially offset by an increase in adjusted income tax expense. Refer to "Non-GAAP Financial Measures" footnote four and six for further details on income tax expense.

COVID-19

The global crisis resulting from the spread of coronavirus ("COVID-19") impacted our global restaurant operations for the three and nine months ended September 30, 2021 and 2020.

While the impact of COVID-19 on system-wide sales growth, system-wide sales, comparable sales and net restaurant growth was significant for the three and nine months ended September 30, 2020, in the 2021 periods these metrics were affected to a lesser extent, with variations among brands and regions. During 2020 and the nine months ended September 30, 2021, substantially all TH, BK and PLK restaurants remained open in the U.S. and Canada, some with limited operations, such as drive-thru, takeout and delivery (where applicable), reduced, if any, dine-in capacity, and/or restrictions on hours of operation. During the three months ended September 30, 2021, on average 97% of our restaurants were open worldwide, including approximately 98% of our restaurants in the U.S. and Canada and approximately 96% of our restaurants in the rest of the world. By contrast, during the three months ended September 30, 2020, on average 94% of our restaurants were open worldwide, including approximately 97% of our restaurants in the U.S. and Canada and approximately 91% of our restaurants in the rest of the world. During the nine months ended September 30, 2020, a number of markets required temporary complete closures while implementing lockdown orders. While many regions have since eased restrictions, certain markets continue to be impacted and re-imposed restrictions in the nine months ended September 30, 2021. We expect local conditions to continue to dictate limitations on restaurant operations, capacity, and hours of operation.

During the three and nine months ended September 30, 2021, COVID-19 contributed to labor challenges, which in some regions resulted in reduced operating hours and service modes at select restaurants as well as supply chain pressures.

With the pandemic affecting consumer behavior, the importance of digital sales, including delivery, has grown. We expect to continue to support enhancements of our digital and marketing capabilities. While we do not know the full future impact COVID-19 will have on our business, we expect to see a continued impact from COVID-19 on our results in 2021.

Reclassification of Advertising Revenues and Expenses

Certain prior year amounts in the statement of operations and accompanying segment results have been reclassified in order to be comparable with the current year classifications. These consist of the quarter and year to date September 30, 2020 reclassification of advertising fund contributions from Franchise and property revenues to Advertising revenues and advertising fund expenses from Selling, general and administrative expenses to Advertising expenses, with General and administrative expenses now presented separately. Depreciation and amortization expenses related to the advertising funds have also been reclassified from Franchise and property expenses to Advertising expenses. These reclassifications did not arise as a result of any changes to accounting policies and relate entirely to presentation with no effect on previously reported net income.

TH Segment Results



Three Months Ended September 30,

(in US$ millions)

2021


2020


(Unaudited)

System-wide Sales Growth


11.1 %



(13.7)%

System-wide Sales

$

1,774


$

1,520

Comparable Sales


8.9 %



(12.5)%







Net Restaurant Growth


4.1 %



1.0 %

System Restaurant Count at Period End


5,137



4,934







Sales

$

592


$

506

Franchise and Property Revenues

$

230


$

205

Advertising Revenues

$

63


$

51

Total Revenues

$

885


$

762







Cost of Sales

$

462


$

388

Franchise and Property Expenses

$

84


$

80

Advertising Expenses

$

67


$

46

Segment G&A

$

27


$

20

Segment Depreciation and Amortization

$

31


$

28

Adjusted EBITDA(1)(3)

$

278


$

258

(3)

TH Adjusted EBITDA includes $3 million and $2 million of cash distributions received from equity method investments for the three months ended September 30, 2021 and 2020, respectively.

For the third quarter of 2021, the increase in system-wide sales was primarily driven by comparable sales of 8.9%, including Canada comparable sales of 9.5%, as well as a decrease in the impact of temporary closures of certain restaurants related to the COVID-19 pandemic, and net restaurant growth of 4.1%.

The year-over-year increase in Total Revenues on an as reported and on an organic basis was primarily driven by an increase in system-wide sales. This increase in Total Revenues was also driven by favorable FX movements on an as reported basis.

The year-over-year increase in Adjusted EBITDA on an as reported and on an organic basis was primarily driven by an increase in system-wide sales, partially offset by advertising fund expenses exceeding advertising revenues in the current year compared to advertising revenues exceeding advertising fund expenses in the prior year and an increase in Segment G&A. This increase in Adjusted EBITDA was also driven by favorable FX movements on an as reported basis.

BK Segment Results



Three Months Ended September 30,

(in US$ millions)

2021


2020


(Unaudited)

System-wide Sales Growth


12.3 %



(7.9) %

System-wide Sales

$

6,212


$

5,484

Comparable Sales


7.9 %



(7.0) %







Net Restaurant Growth


1.3 %



2.4 %

System Restaurant Count at Period End


18,923



18,675







Sales

$

16


$

17

Franchise and Property Revenues

$

337


$

305

Advertising Revenues

$

114


$

111

Total Revenues

$

467


$

433







Cost of Sales

$

16


$

16

Franchise and Property Expenses

$

34


$

42

Advertising Expenses

$

110


$

105

Segment G&A

$

47


$

37

Segment Depreciation and Amortization

$

12


$

13

Adjusted EBITDA(1)

$

272


$

245

For the third quarter of 2021, the increase in system-wide sales was driven by comparable sales of 7.9%, including rest of the world comparable sales of 16.2% and a decrease in US comparable sales of (1.6)%, as well as a decrease in the impact of temporary closures of certain restaurants related to the COVID-19 pandemic, and net restaurant growth of 1.3%.

The year-over-year change in Total Revenues on an as reported and on an organic basis was primarily driven by the increase in system-wide sales. This increase in Total Revenues was also driven by favorable FX movements on an as reported basis.

The year-over-year change in Adjusted EBITDA on an as reported and on an organic basis was primarily driven by the increase in system-wide sales and bad debt recoveries in the current year compared to bad debt expense in the prior year, partially offset by an increase in Segment G&A. This increase in Adjusted EBITDA was also driven by favorable FX movements on an as reported basis.

PLK Segment Results


Three Months Ended September 30,

(in US$ millions)

2021


2020


(Unaudited)

System-wide Sales Growth


4.4 %



21.5 %

System-wide Sales

$

1,392


$

1,331

Comparable Sales


(2.4) %



17.4 %







Net Restaurant Growth


5.5 %



7.1 %

System Restaurant Count at Period End


3,607



3,418







Sales

$

13


$

18

Franchise and Property Revenues

$

72


$

67

Advertising Revenues

$

58


$

57

Total Revenues

$

143


$

142







Cost of Sales

$

12


$

14

Franchise and Property Expenses

$

3


$

3

Advertising Expenses

$

60


$

58

Segment G&A

$

15


$

12

Segment Depreciation and Amortization

$

2


$

2

Adjusted EBITDA(1)

$

57


$

58



For the third quarter of 2021, the increase in system-wide sales growth was driven by net restaurant growth of 5.5% and, to a lesser extent, a decrease in the impact of temporary closures of certain restaurants related to the COVID-19 pandemic, partially offset by a decrease in comparable sales of (2.4)%, including a decrease in US comparable sales of (4.5)%.

Total Revenues and Adjusted EBITDA on an as reported and on an organic basis were consistent year-over-year.

Cash and Liquidity

As of September 30, 2021, total debt was $13.0 billion, net debt (total debt less cash and cash equivalents of $1.8 billion) was $11.2 billion, and net leverage was 5.2x. During the third quarter we issued $800 million of 3.875% First Lien Notes due 2028 and redeemed $775 million of our 4.25% First Lien Notes due 2024. During the third quarter we also repurchased 2.8 million RBI common shares for $182 million under our $1 billion share repurchase program and as of September 30, 2021 had $818 million remaining under the authorization.

The RBI Board of Directors has declared a dividend of $0.53 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2021. The dividend will be payable on January 5, 2022 to shareholders and unitholders of record at the close of business on December 21, 2021.

Investor Conference Call

We will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Monday, October 25, 2021, to review financial results for the third quarter ended September 30, 2021. The earnings call will be broadcast live via our investor relations website at http://investor.rbi.com and a replay will be available for 30 days following the release. The dial-in number is (877) 317-6711 for U.S. callers, (866) 450-4696 for Canadian callers, and (412) 317-5475 for callers from other countries.

Contacts

Investors: investor@rbi.com
Media: media@rbi.com

About Restaurant Brands International Inc.

Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with approximately $34 billion in annual system-wide sales and over 27,000 restaurants in more than 100 countries. RBI owns three of the world's most prominent and iconic quick service restaurant brands - TIM HORTONS®, BURGER KING®, and POPEYES®. These independently operated brands have been serving their respective guests, franchisees and communities for over 45 years.

Forward-Looking Statements

This press release contains certain forward-looking statements and information, which reflect management's current beliefs and expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. These forward-looking statements include statements about our expectations regarding the effects and continued impact of the COVID-19 pandemic on our results of operations, business, liquidity, prospects and restaurant operations and those of our franchisees, including local conditions and government-imposed limitations and restrictions, and our ability to continue to navigate the impact of the pandemic, our long-term growth goals, outlook and prospects, our investments in digital and marketing initiatives, our ability to continue to return capital to our shareholders through dividends and share repurchases, our ability to grow throughout 2021 at pre-pandemic levels and accelerate growth into 2022 and the impact of our year-to-date growth and development pipeline on that future growth, our ability to achieve our long-term restaurant growth goals, and our goals with respect to reduction in greenhouse gas emissions. The factors that could cause actual results to differ materially from RBI's expectations are detailed in filings of RBI with the Securities and Exchange Commission and applicable Canadian securities regulatory authorities, such as its annual and quarterly reports and current reports on Form 8-K, and include the following: risks related to unforeseen events such as pandemics; risks related...

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In millions of U.S. dollars, except per share data)
(Unaudited)


Three Months Ended
September 30,


Nine Months Ended
September 30,


2021


2020


2021


2020

Revenues:








Sales

$

621



$

541



$

1,718



$

1,450


Franchise and property revenues

639



577



1,801



1,552


Advertising revenues

235



219



674



608


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